- Japan's first-ever trade deficit with the EU underlines the threat to its economy posed by the crisis in Spain and Greece
- Deficits have opened up all over Japan's trade account since the Fukushima crisis
- In May Japanese shipments to the EU fell 0.9 per cent
- There was a 6 per cent rise in imports, meaning a small deficit of $141m
Japan has posted its first-ever trade deficit with the EU, underlining the threat to the recovery of the world's third-largest economy posed by the debt crisis roiling Spain and Greece.
Big deficits have opened up all over Japan's trade account since March last year when the Fukushima nuclear crisis caused imports of replacement fuels to soar, while the strong yen and uncertain global demand weighed on exports.
In recent months, however, Japan's trade with the EU has deteriorated sharply. In May, Japanese shipments to the EU fell 0.9 per cent compared with the same period a year ago, even as they surged 38 per cent to North America.
A 6 per cent rise in imports, meanwhile, meant that Japan's trade balance with the EU slipped into a small deficit of Y11bn ($141m), its first trade shortfall with the regional bloc since records began in 1979. In the three years before the Lehman crisis, Japan posted an average monthly surplus of Y363bn with the EU.
On a more positive note for the economy, big year-on-year gains in imports of cars, clothing and furniture showed that Japanese consumers have abandoned much of the self-restraint exhibited in the aftermath of the quake.
Public and private consumption was the main driver of the country's strong gross domestic product growth in the first quarter, recently revised up to 1.2 per cent.
But the May trade data will intensify fears about the impact of the European crisis, and may increase the chances of the Bank of Japan voting for extra monetary easing next month, when it is due to update its inflation outlook.
Minutes of the BoJ's last policy meeting, also published on Wednesday, showed growing sensitivity among policy makers to an escalation of the European debt problem. The BoJ should "stand ready to take appropriate actions without ruling out any options in advance," some members said.
Overall, Japan's exports rose by a tenth from May last year. As imports rose by a similar amount, the overall trade balance showed a Y907bn deficit, little changed on a year earlier.
There is a "stark contrast" between the export picture in the US, and that of the EU and China, said Kiichi Murashima, chief economist at Citi in Tokyo. He added that on a price-adjusted basis, exports from Japan to both the EU and China were weaker in April and May than in the first quarter.
"We don't have any hope for Europe, so exports to China -- that is the key," said Mr Murashima.